Correlation Between KIOCL and Raj Rayon

Can any of the company-specific risk be diversified away by investing in both KIOCL and Raj Rayon at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining KIOCL and Raj Rayon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KIOCL Limited and Raj Rayon Industries, you can compare the effects of market volatilities on KIOCL and Raj Rayon and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in KIOCL with a short position of Raj Rayon. Check out your portfolio center. Please also check ongoing floating volatility patterns of KIOCL and Raj Rayon.

Diversification Opportunities for KIOCL and Raj Rayon

0.77

Correlation Coefficient

KIOCL  Raj Rayon

Poor diversification

The 3 months correlation between KIOCL and Raj is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding KIOCL Limited and Raj Rayon Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raj Rayon Industries and KIOCL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on KIOCL Limited are associated (or correlated) with Raj Rayon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raj Rayon Industries has no effect on the direction of KIOCL i.e., KIOCL and Raj Rayon go up and down completely randomly.

Pair Corralation between KIOCL and Raj Rayon

Assuming the 90 days trading horizon KIOCL Limited is expected to generate 2.34 times more return on investment than Raj Rayon. However, KIOCL is 2.34 times more volatile than Raj Rayon Industries. It trades about -0.03 of its potential returns per unit of risk. Raj Rayon Industries is currently generating about -0.17 per unit of risk. If you would invest  40,905  in KIOCL Limited on September 4, 2024 and sell it today you would lose (3,835) from holding KIOCL Limited or give up 9.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

KIOCL Limited  vs.  Raj Rayon Industries

KIOCL Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KIOCL Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, KIOCL is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Raj Rayon Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raj Rayon Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with KIOCL and Raj Rayon

The main advantage of trading using opposite KIOCL and Raj Rayon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KIOCL position performs unexpectedly, Raj Rayon can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Raj Rayon will offset losses from the drop in Raj Rayon's long position.

The idea behind KIOCL Limited and Raj Rayon Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..